Follow-up Measures Required to Avert Financial Risks

2017-02-23

The study of the provision of mortgage loans on farmers’ land ownership right, contract management right and the property right of houses is of practical significance for the development of agriculture, rural areas, and farmers. At present, it is still difficult for farmers to obtain loans from banks and one major reason lies in the insufficiency of mortgage assets, as their farmland and houses are not allowed to be mortgaged. After the issuance of the Interim Measures of the Mortgage Loans on Contracted Management Right of Rural Land and the Interim Measures of Mortgage Loans on the Property Right of Farmers’ Houses (both for trial implementation), the government has made it clear that before end of 2017, the above-mentioned policy measures would be implemented in 291 counties, including county-level cities and districts.

The key point of the implementation of these measures rests on whether a “firewall” can be built to lower the mortgage defaults and to encourage the banks to provide the said mortgage loans to farmers. Currently, some places such as Lishui city and Haiyan county in Zhejiang province have made active explorations and developed some financial items such as agricultural insurance and guaranteed fund. Meanwhile, local governments need to positively innovate relevant methods with financial institutions to elaborate on the risk-sharing mechanism.

There’re still obstacles for the implementation of these measures nationwide. 1. Due to the limited acreage of land owned by the farmers and the high cost but small amount of loans, more policy measures are needed to boost the initiatives of the financial institutions to provide loans. 2. The land management law and housing registration regulations only permit housing transfer between farmers of the same village, and this has made difficult to make house ownership transfer beyond the local village. As a result, relevant reforms on the rural property rights system and the land ownership system need to be fleshed out and revised. 3. The rural property rights exchange market remains inactive, as most institutions serve mainly for the circulation of farmer’s land operation rather than the circulation of disposition trading.